Iraqi oil exports dive; there’s no telling where the money went

Iraq’s oil exports hit another post-invasion low in December and January, according to the Oil & Gas Journal. How do they know? Good question: according to Reuters, production and exports have gone unmetered since the Coalition Provisional Authority took over the country following the 2003 invasion; until new meters are installed, everybody’s just guessing.

Among the best chronicles of the haziness surrounding Iraq’s oil production and exports — and the general pall of corruption that hangs over the country — comes from journalist Ed Harriman, writing in the July, 2005 issue of the London Review of Books. Harriman wrote that in addition to the roughly $9 billion in Iraqi oil funds that vanished without a trace during CPA head Paul Bremer’s reign, the International Advisory and Monitoring Board established to oversee and audit CPA expenditures of Iraqi cash “discovered that Iraqi oil exports were unmetered.”

Neither the Iraqi State Oil Marketing Organisation nor the American authorities could give a satisfactory explanation for this. ‘The only reason you wouldn’t monitor them is if you don’t want anyone else to know how much is going through,’ one petroleum executive told me. Officially, Iraq exported oil worth $10 billion in the first year of the American occupation. Christian Aid has estimated that oil worth up to an additional $4 billion may also have been exported and is unaccounted for. If this is correct, it would have created an off the books slush fund that both the Americans and their Iraqi allies could use with impunity to cover expenditures they would rather keep secret – among them the occupation costs, which were rising far beyond what the Bush administration could comfortably admit to Congress and the international community.

The Iraqis now say that they’re pumping somewhere around 2 million barrels per day, but with exports effectively shuttered by sabotage in the north, official exports are funneled entirely through the southern port of Basra. Which remains, nearly two years after the CPA packed up and got out of Dodge, unmetered.

And they’ll stay that way for a while. The Reuters story linked above is about the announcement of a deal between Iraq and Royal Dutch Shell to establish a system congruent with international standards for measuring oil and gas production and exports.

The Iraqi Oil Ministry has reached a preliminary agreement with the Royal Dutch Shell group to consult with it on creation of a system measuring the flow of oil, gas and related products, whether inside Iraq or for export to foreign markets, said Deputy U.N. Ambassador Feisal Amin al-Istrabadi.

The ministry also has concluded an agreement to rebuild a metering system in its southern oil port of Basra, where oil is loaded onto tankers for export, the U.N. envoy said in a March 22 letter circulated at the United Nations on Friday.

“This long-term development project will be implemented in stages that may be fulfilled in one or two years,” he said.

The letter was addressed to the International Advisory and Monitoring Board, created by the U.N. Security Council in 2003 to watch over the stewardship of Iraq’s natural resources.

Emphasis mine. So we’ll know in a year or two, possibly, how much oil Iraq is pumping and how much is sold on the official market. What we’ll never know is how much was stolen and smuggled between the time the CPA took over Iraq and the time the meters are installed. By way of explanation for the unregulated oil trade, Harriman provides an insight into the conditions under which the IAMB and Iraq’s own internal auditors operated during the first two years of the war.

The IAMB … spent months trying to find auditors acceptable to the US. The Bahrain office of KPMG was finally appointed in April 2004. It was stonewalled. ‘KPMG has encountered resistance from CPA staff regarding the submission of information required to complete our procedures,’ they wrote in an interim report. ‘Staff have indicated . . . that co-operation with KPMG’s undertakings is given a low priority.’ KPMG had one meeting at the Iraqi Ministry of Finance; meetings at all the other ministries were repeatedly postponed. The auditors even had trouble getting passes for the Green Zone. …

Bremer re-established the Iraqi Board of Supreme Audit a month before he left Baghdad. It is now said to have more than a thousand auditors and support personnel spread throughout Iraqi government ministries. A new Iraqi Commission on Public Integrity, the equivalent of the FBI, is said to have 200 staff and 15 US advisers. Yet according to the latest American figures [at the time of publication], of more than 3400 complaints, only about one in 50 has been passed to the Commission on Public Integrity for possible prosecution.

There is an explanation for this lack of activity. On Thursday, 1 July 2004, two days after Bremer left Baghdad, Ehsan Karim, the new head of the Board of Supreme Audit, was killed by a bomb as he left the Finance Ministry. Two weeks later, Sabir Karim (no relation) was murdered in a drive-by shooting as he set off for work at the Ministry of Industry, where he was in charge of investigating corruption. A few weeks ago, another senior official investigating corruption was murdered. The IAMB keeps the names of its Iraqi delegates secret to keep them alive.

No wonder Ahmed Chalabi was so keen on inhabiting the corner office at the Oil Ministry.

Much has rightly been made of the connections between current Bush administration officials and the Reagan/Bush era Iran-Contra affair, which involved much cooking of books and funneling of cash and arms to officially off-limits and by any standard unsavory characters in Central America and elsewhere around the world, including Iran. When things began to go seriously south in Iraq, unnamed officials began muttering of “the Salvadoran option” — the creation of unofficial government death squads to deal with the expanding insurgency — and soon thereafter, reports of kidnappings and executions perpetrated by men wearing “stolen” Iraqi police and army uniforms became common.

A letter to the London Review of Books in response to Harriman’s story suggests that the connections and practices at play in Iraq go back considerably further than Iran-Contra. James Hamilton-Paterson wrote in to say that “in 1971 I wrote a book about Cornelius Hawkridge, a Hungarian-American who conducted a vendetta against the military and civilian corruption that dogged the American presence in Vietnam.”

I still have many volumes of corroborative evidence presented to US Senate hearings at the time: Improper Practices, Commodity Import Program, US Foreign Aid, Vietnam; Military Club Fraud and Currency Manipulations etc. They detail the same kinds of practice as Harriman does. The General Accountability Office’s report of May 1967 revealed that the civilian contractor RMK/BRJ could not account for $120m worth of materiel shipped from the US to Vietnam. RMK/BRJ’s name crops up frequently in investigations from the period in connection with the disappearance of huge sums of taxpayers’ money – one reason for this was the company’s gross overcharging for gasoline (Harriman found evidence of the same thing). The acronym stood for Raymond, Morris-Knudsen, Brown, Root and Jones. Much of the current investigation surrounds Halliburton’s subsidiary KBR, which stands for Kellogg, Brown and Root. I have yet to see anyone point out KBR’s genealogical connections.

A few years ago in Manila I had dinner with John Negroponte when he was still US ambassador there. Later, he would become ambassador to post-Saddam Baghdad and then George W. Bush’s intelligence supremo. He was a Vietnam veteran, and I plied him with questions about the massive corruption during the war. ‘Yes,’ said Negroponte, who had also been involved in the covert funding of the Contras in Nicaragua, ‘we learned an awful lot from that war.’

Foolishly, I took this to imply repentance.

Wouldn’t it be loverly to have a press in this country possessed of some sort of institutional memory?

Not sure how many people know of this, so I am including this info for anyone who wants to look into it in more depth.

Unmetered oil was first exposed in a report that came out in June of 2004 by Christian Aid. (at least, that was the first I read of it) I’m only aware of this report, and a subsequent report by the ICG because I had posted them in my old blog at the time.

The Christian Aid report includes notes from meetings that point out that Iraq oil was known to be unmetered. Awarding a contract for metering was continually being put off.

The above links to the old posts include the urls for the PDF’s of the reports. But I haven’t checked to see if they are still online. Most of the info on umeterd oil was included in the foot notes of the reports.

Why oh why dont we have a more professional press corps? One that doesn’t roll over in a mudpit of “patriotism” and come out covered in slime.
And the right wing nuts scream that we have a “liberal” press.